First things first...assuming you get this to work (and it isn't easy), it will be incredibly slow. Your SATA hard drives would be much faster.
So, if you still want to do this, then the answer as to whether it can be done is, sort of, as long as you want Windows 8.
Windows 8 Enterprise has a feature called "Windows To Go" that lets you do what you want (but unless you get a bootleg copy, you can't buy it for individual use).
You can, with further work, use Windows 7 to build a portable Windows 8 from any version of Windows 8 (as long as you have the Windows 8 install disk).
You'll still need other tools to get it all working as well.
It requires creating partitions on your USB drive, which you usually can't do using Windows tools...you'll need something like Bootice to create partitions.
And, after a long of time of issues, errors and having to do it all over a few times until you get it to work, you'll be sorely disappointed at how slow it is.
Did I mention it will be slow?